In Which of the Following Games Is It Conceivable That

question 10

Multiple Choice

In which of the following games is it conceivable that a risk-averse person might be willing to play?

• A) a game where she has a 70 percent chance of winning $1 and a 30 percent chance of losing $1
• B) a game where she has a 60 percent chance of winning $100 and a 40 percent chance of losing $100
• C) a game where she has a 60 percent chance of winning $2 and a 40 percent chance of losing $1
• D) All of the above are correct.

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Definitions:

Discount Rate

This rate is applied in the framework of DCF analysis for the purpose of calculating the current value of foreseeable cash flows.

Compounded Annually

Compounded annually refers to the calculation and addition of interest to the principal sum of a loan or deposit once every year.

Simple Interest

Interest calculated only on the principal amount, or on that portion of the principal amount which remains unpaid.

Savings Accounts

Bank accounts that earn interest over time, allowing individuals to deposit funds for future use.